Moving at the speed of molasses - Interview with Mike St. John

By Peter Roosen

Freight trains and toilet paper have a lot in common when looking from a marketing perspective. They are examples of products that have been around long before we were born that will still be around long after we are gone. They are among the 95% of the things we see and use that are considered established products and services from traditional industries. You won't see them featured in media because they are simply part of the landscape.

Marketers can easily lose sight of everyday products and the marketing opportunities related to them. This is especially the case for stove-pipe industries that produce the many industrial goods and services that form the backbone of our modern industrial economy. The highly popularized electronic gadgets that entertain and keep us in contact do not exist in a vacuum. Most of them are brought to market on the backs of those freight trains that trudge back and forth across the landscape virtually unnoticed. And let's face it, the only time anybody notices toilet paper is when there isn't any.

This month's newsletter takes a look at a great marketing and innovation example from the very traditional lumber industry. Marketers be warned. Making a big splash in a traditional industry isn't an easy thing to do. Last week, we traveled to Boise, Idaho to interview someone who has done just that - in spades - and who continues to do so. Former navy seal Mike St. John was the marketing man behind the shift to engineered structural residential building products from the basic sawn timber that has been used for centuries to hold our floors and roofs together.

Mike has over 32 years selling and producing these structural building products that involve efficiently using the whole tree rather than just the pieces sawn out from the middle to make our buildings. Introducing Trus Joist products was the highlight of his career. These products now have approximately 50% market share and are still growing. At the start, 1976 sales were less than $1 million, and today sales of over $2 billion are made annually. Mike is currently a board member for the APA (American Plywood Association) and he is chair of the EWS (Engineered Wood Systems) committee. He is also a director for Pacific Woodtech Corp. www.pacificwoodtech.com where he also serves as vice president of sales and marketing. Mike teaches courses on marketing and innovation to engineers while remaining keenly interested in these areas.

The road to successfully transforming an industry is not an easy one but Mike is someone who has traveled this road and is happy to share his insights for those of us who are undertaking a similar journey. You'll gather from our interview that there are some key ingredients that can be used to help transform any industry where a good idea's time has come.


Interview with Mike St. John.

Q. Who would you hold out as an inspirational leader?

A. Harold Thomas and Dick Hansen are two who spring to mind immediately. Harold is still alive while both were highly influential from our beginnings in the 1970s. I'll focus on Harold who is a salesman who started a company. He always believed and still believes that if you give salesmen an opportunity to make money, they will perform. The good ones will sort themselves from the rest. When I was vice president of sales, there were more than 300 salesmen of which 250 made more money than executives and managers. We celebrated that. We truly had an organization that the head of was a salesman's champion.

Trus Joist would not be alive today had it not been for the sales guys. The products were very expensive compared to traditional methods.

Q. How were you able to get such expensive products into the market?

A. I had an important accomplishment back in the early days. It was in Colorado at a time when there were fancy ski resorts being built that needed very large roof trusses that if made using conventional materials and methods were too big and difficult to truck through the highway tunnels. At the time, we were just making floor joists. I figured that since we could make these engineered pieces in any length, they could make great trusses while being relatively easy to transport. It worked.

Q. What drove you and your team?

A. We were and still are on a mission to build better homes.

Q. What do you see as the success drivers for successful innovation in a traditional industry such as yours?

A. You need to be truly committed to the idea. Beyond that, execution is important. In my experience, the long term follow up gets bound up in financial performance numbers. So many underestimate the time and cost of doing the execution - even in a traditional lumber business which is like watching molasses flow. It took 30 years to get 50% market share. Sometimes great ideas take that long. A $2 billion market is all it is in our case. Initially we were 5 people going after this market.

In some industries some great ideas, no matter how great, have very slow traditional speed. This is unlike ipods, cell phones and other tech products that move at the speed of light. The backbone of all commerce in the world are still ugly traditional products like sheet rock, timber, steel, petroleum and rubber. These are traditional businesses or products that just don't move as fast.

I've always been envious of the computer and software guys who build extinction into their model. If you buy a computer today, it will be gone in a couple years. If you buy an I-joist today, it will still be around and you'll be able to buy one 25 years later just like the one 25 years before. I've had three Blackberries in two years because they keep advancing. Take the two by fours in my house. I could have bought the same ones in the mid 1800s.

The big lessons are having great patience, deep pockets and making sure the traditional products and industries evolve so that we don't lose our planet. Today we plant 23% more trees worldwide than we take. But not all countries are on side. Hardwood from southeast jungles are an exception as they are stripped for cash - as our northern lands not so long ago. The lumber business can outgrow demand but we have to do it right. Switzerland, Finland and New Zealand have been doing a good job and are able to grow more than they demand. The lumber business takes a huge amount of carbon out of the atmosphere.

The innovation gets down to using every bit of the wood fiber from the tree. Today, in North America, we don't waste a single ounce of wood fiber. The forest products group as a whole has really figured out how to preserve itself through sustainable practices.

Tackling Telecom: Innovation at Telus

This month we're featuring an interview with Bob Petrovic, Director of Services Planning at Telus. In his role at one of Canada's leading telecommunication companies, Bob has been closely involved with managing innovation and sheparding new communication products through the new product process.

As Bob is at the forefront of one the fastest growing segments in virtual communication, mobile services, I was interested in his take on managing innovation. Huge capital expenditures are common in the telecommunications industry, so Bob has a common challenge on a bigger scale, in these economic times - trying to manage long-term investment with short term risk.

In times of financial crisis where companies of all sizes are challenged with funding projects, innovation tends to come from those smaller, more nimble and less capital intensive companies. However, on the telecommunications front, where building the infrastructure takes massive amounts of money, larger companies with legacy systems have the advantage.

In my interview with Bob I was particularly struck by his comments regarding the disconnect that often occurs between Marketing and R&D. In a technology company, in particular where new product development tends to reside with those involved in technology development, this

communication gap can mean the difference between being first to market with an innovative and successful product and time spent developing products that don't meet consumers' needs.

I've talked before about how crucial I believe it is to develop strong working relationships between Marketing and Product Development. Cross-training and working groups comprised of members of both departments tend to improve communication and prevent "orphan" products. I've seen this time and time again, where a great technology product lacks a champion in marketing and so languishes in development stage or the reverse, when marketing research uncovers a consumer need but, without R&D support never moves beyond the idea stage.

In the fast moving and competitive telecommunications marketplace, this type of disconnect can mean the difference between being first to market, and obtaining critically important patents and scrambling to play catch-up as the industry moves forward. Marketing is tasked with correcting identifying the drivers that rule the market is critical and communicating that to those responsible for developing products to meet those needs. When this type of communication breaks down, the result is lost time and lost opportunities.

Bob points out in our interview how critical it is for those of us on the forefront of innovation to reach out beyond out own industries for new ideas and expand beyond our computer screens for ideas on managing innovation. I know you'll enjoy reading his thoughts on managing innovation in this critically important time.

What is your role at Telus?

My primary responsibility at TELUS is for consumer services planning. The scope of the role is broad, ranging from development of product strategies through to incubation of new mobile and broadband services. The goal for these activities is to align activities across the organization & assess emerging opportunities.

In your opinion what are the key trends affecting your industry?

Economic conditions are obviously a key consideration for network operators, impacting a range of decisions from market planning to capital spending. This will be an ongoing consideration for mobile and wireline service providers for the foreseeable future.

In terms of technology trends, it's fair to say that the rise of 3G adoption, driven by smartphones and mobile applications, is a key mobile trend. Video continues to be a key theme in the home with an increasing number of options for time & placeshifted viewing. As with any trend, there are opportunities and risks that need to be understood and acted upon.

How do you measure innovation success?

Commercial endeavors are ultimately measured by profitability and I don't think innovation can be treated differently. Successful innovations will be those that drive usage and adoption in a sustainable way - they have to fulfill a need and be convenient so that people will want to use them. While forecasting commercial success for new initiatives can be tricky, convenience, as measured across economic (price, cost) and esthetic (ease of use) dimensions, is usually a pretty good indicator of future performance.

What is a biggest pitfall that impedes successful innovation?

In any industry, a disconnect between technology and marketing organizations is probably the greatest hindrance to innovation. Opportunities that arise in one area may not be fully appreciated in the other. Maintaining an on-going conversation across these groups goes a long way to realizing opportunities appropriately by managing priorities & expectations.

What is an example of an innovative company that people have never heard of?

In my industry (and hometown), Teradici stands out as a company that's using technology to solve some real problems today with a great vision for the future. They develop thin client solutions that push computing power into the cloud efficiently and transparently.

Outside my industry, I really like what folks like HippoRoller and Kyoto Energy are doing by creating low-cost, simple solutions to real-world problems for emerging nations. Both are applying innovation in a way that increases convenience for the basic needs of life.

List a few of your favourite sites on innovation.

I find myself gravitating to books more than websites for understanding the art & science of developing ideas - I really liked Blue Ocean Strategy and find myself going back to it often.

Lightreading.com is a great site for telecom developments and they do a great job of covering startups which helps me keep a pulse across a wide range of my industry's topics.

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Bob Petrovic is the Director of Services Planning for TELUS Consumer Solutions. In his decade with TELUS he product managed the mobile computing services portfolio from early telemetry to mobile broadband. Prior to joining TELUS, he launched a number of industry-first solutions for Internet developers. Bob has a Bachelor of Mathematics (Computer Science) from the University of Waterloo. He lives in Vancouver with his wife, 2 kids, and some fish.

Do you have a terrible idea?

I just finished my #2 speech for Toastmasters. Let me know what you think.

Speech title: Do you have a terrible idea?

How many of you have watched Dragons Den or American Inventor? These shows feature entrepreneurs and inventors all pitching their ideas to get financing from these business experts.

Like these experts on these shows, we see a lot of ideas too. It's funny because we actually have talked to many of the same people.

People regularly ask me, "What do you think of our product or idea?"

I tried all sorts of tactful ways to answer this question (and believe me I tried many)

I finally found the perfect answer.... (Click Play if you are interested)

Marketing ROI - Kodak's "Celebrity Apprentice" Experience

Last month Andy wrote in asking "I'd love to see something on marketing and cost benefit analysis, it's been my experience the two things rarely go hand in hand. I hope I'm an isolated case but guess that I'm not."

I'm making that the focus of this month's newsletter. On Thursday, Peter Roosen and I interviewed Jeff Hayzlett (2nd from the right), Kodak's Chief Business Development Officer and Vice President and David Lanzillo Director, Corporate Communication and Vice President, Communications & Public Affairs.

Tip #1: Try something new if what you are already doing isn't working.

We asked them about their experience in having Kodak featured on Donald Trump and Mark Burnett's "The Celebrity Apprentice" show a few weeks ago.To put this into perspective, Kodak, a 125 year old company, has undergone a major transformation as its traditional photographic films and papers business has been virtually eliminated by the advent of digital photography. The company has gone from having 150,000 employees in 1988 to 51,000 in 2005 and 27,000 today. 60% of the current employees are new to the company within the past 4 years. Yet Kodak remains on the Fortune 500 list in spite of these huge changes to its traditional business.

Jeff said there were two impacts of having Kodak featured on "Celebrity Apprentice" The first one was internal. "It was a morale lifter. Employees see that we are back on the air." He said of the major transition completed at the end of 2007 that employees had experienced considerable "transformation fatigue" resulting from "cost crushing" and "pumping into new businesses."

Tip #2: Don't stack various campaigns if trying something new. Kodak focused on one big one for this time frame - a risky one.

The second impact of being featured on the Trump show was external. Kodak paid about $2.5 million to engage in what Jeff described as "the best product placement deal in history." He said there were "4.6 mentions per minute, about one every 15 seconds, with a total of 89 million viewers. We doubled our sales that week and weren't doing anything else at the time. This was for sales on consumer stuff for what we normally had going out the door."

Tip #3: Create slogan to help communicate your idea or strategy.

Kodak's focus for the show was promoting its new cost model for printer ink consumables. Kodak is launching into the high margin ink market with its "pricey ink stinks" slogan. Jeff said that he would be on live television this week "debating Gene Simmons on getting rid of pricey ink."

David figured the advertising and public relations value equivalency for the Trump show was in the "tens of millions of dollars."

Tip #4: Activation counts more than buzz.

With the improvement of technology and increased competition, there is ever-increasing pressure to make marketing spending more accountable. David and Jeff claimed that activation (marketing efforts that drive sales and not just awareness or buzz) was the thing that counted. Jeff said "if you talk about buzz building in this company, you buzz yourself out the front door."

Tip #5: Have people from different key areas on board with your marketing.

Kodak has a brand and development council with representation from R&D, legal and M&A on it. It also has a marketing operations council tasked with ways to leverage the marketing spend. The company also has its marketing strategy council led by the CEO. Kodak has an EMM (Enterprise Marketing Management) system across the company with dashboards or predictive indicators for campaigns and growth initiatives. This is especially important when one considers that 80% of the company's revenue comes from 19 products, only half of which were in existence 10 years ago.

Tip #6: Make things measurable using whatever tools are needed.

Quantifying marketing ROI (return on investment) is not new. It just hasn't been very doable in the past. Soft measures including brand awareness were more easily determined than strict financial measures such as ROI for marketing investment. Technology and improved ways of measuring customer behavior is making the difference today. Beyond basic software like CRM (customer relationship management) packages, the ability to employ technologies to help track and analyze relevant knowledge helps companies to deepen their understanding of the customer. That is a prerequisite to being able to apply the financial return on investment measurement. Kodak is a large company that has taken this to a high level as an important part of its strategy for transforming itself from a traditional photographic films and papers company into a key competitor in the digital marketplace.

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